UPDATE 1-RBS India retail unit sale to HSBC falls through

Source :

Last Updated: Fri, Nov 30, 2012 19:10 hrs

* Two UK banks scrap deal after more than 2 years of talks

* India business has 31 branches, 400,000 customers

By Steve Slater

LONDON, Nov 30 (Reuters) - Royal Bank of Scotland's
sale of its Indian retail and commercial banking operations to
HSBC has fallen through more than two years after it
was struck, leaving RBS to wind it down.

RBS agreed to sell the business to HSBC in July 2010. It has
31 branches, 400,000 customers and was profitable, with assets
of 190 million pounds ($305 million) and revenues of 42 million
pounds in the first nine months of this year.

The collapse is further evidence of the difficulties of
completing banking deals amid changing strategies, stricter
regulation and complex IT issues. RBS's $2.7 billion sale of 316
branches to Santander also fell apart last month after
more than two years of talks, which the Spanish bank blamed on
IT issues.

RBS and HSBC declined to specify the reasons for the
breakdown, other than a failure to complete all the details by
Friday, the so-called long stop date by which issues such as
data and customer transfers and regulatory approvals should be
resolved.

India's regulator has strict rules on branch ownership by
foreign banks and that had caused complications with the deal,
local reports have previously said.

HSBC was due to pay a premium of up to $95 million over the
tangible net asset value (TNAV) of the businesses, although the
price could have been reduced if bad debts rose or there were
other changes, and the deal could have ended up costing RBS.

The business had shrunk significantly in the last two years
- it had 1.1 million customers in March 2010.

RBS, 82 percent owned by the UK government, said on Friday:
"Consistent with RBS's strategic objective to reduce or exit its
non-core assets and businesses, it will begin to wind down its
retail and commercial banking business in India, whilst meeting
all customer obligations."

HSBC said it "remains committed to pursuing growth in India"
through its existing operations, saying it is a key strategic
market.

HSBC Chief Executive Stuart Gulliver has been streamlining
the bank and pulling back from some markets since taking over at
the start of 2011, in an effort to cut costs.